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Differences Between State and SEC Regulation of Investment Advisors
States may impose licensing or registration requirements on IARs doing business in their jurisdiction, even if the IAR works for an SEC-registered firm. States may investigate and prosecute fraud by any IAR in their jurisdiction, even if the individual works for an SEC-registered firm.

U.S. Securities and Exchange Commission Information
This information sheet contains general information about certain provisions of the Investment Advisers Act of 1940 and selected rules under the Advisers Act. It also provides information about the resources available from the SEC to help advisors understand and comply with these laws and rules.

It’s somewhat sobering to realize that I’ve been writing for, and about, financial advisors for 30 years now. During that time, I’ve never wavered in my belief that the emergence of client-centered, independent advice—led by the financial planning and accounting professions—is best for clients, for the public as whole and will someday be the way the majority of Americans receive financial advice.

With that said, there have been times when I’ve been particularly proud of, and encouraged by, the emerging planning profession. Two developments that stand out in my mind was the work of NAPFA and Ron Roge in the ‘90s to promote the many advantages of fee compensated advice; and the FPA’s successful lawsuit against the SEC to prevent the expansion of the “broker-exemption,” a.k.a the Merrill Lynch Rule, to managing client assets. But I don’t believe that I’ve ever felt better about financial planners and the rest of the independent advisory profession than I did Tuesday as I read a letter signed by the leading planning organizations and other like-minded organizations, voicing unequivocal support for a fiduciary standard for brokers—and concern that the SEC may be backing away from fulfilling that Dodd-Frank mandate.

The first thing that struck me about the letter to new SEC chair Mary Jo White is that the Financial Planning Coalition (comprising the CFP Board, the FPA and NAPFA) had finally gotten on board with virtually every other major financial consumer protection groups in the country: the other signators are the heads of the AICPA, the Investment Adviser Association, the Consumer Federation of America, NASAA, Mercer Bullard’s Fund Democracy, and even the AARP. This is clearly a group that the SEC will have to take seriously, with a message that leaves no room for “interpretation.”

“After a thorough analysis, however, there are several aspects of the [SEC’s March Request for Information regarding the possible extension of a fiduciary duty to broker-dealers] about which we are very concerned…,” wrote the group. “The assumptions contained in the RFI fail to include key elements of the fiduciary standard, such as the obligation to act in the best interest of the customer…If the SEC were to adopt this approach, we fear that it would significantly weaken the fiduciary standard for SEC-registered investment advisers while adding few new protections for investors who rely on broker-dealers for investment advice. This approach would have negative consequences for investors and is one we would vigorously oppose.”

But perhaps even more important, to my mind anyway, were the comments from each of the signing organizations, which were included in the accompanying press release, in support of the letter. Some, such as those by Heath Abshure, president of NASSA, David Tittsworth, executive director of the IAA, Lauren Locker, chair of NAPFA, Barry C. Melancon, president and CEO of the AICPA, and Mercer Bullard, president and founder of Fund Democracy, were clear statements of their historically unwavering support for an RIA-equivalent fiduciary standard for brokers.

Others made their strongest statements yet about a new broker standard. One of them was Barbara Roper, director of Investor Protection at the Consumer Federation of America: “Broker-dealers call their sales representatives financial advisers, they market themselves based on the advice they offer, and they encourage investors to rely on them as trusted advisers… …That is presumably a key reason Congress, in drafting Section 913 of the Dodd-Frank Act, specified that any new standard for brokers must be the same as the standard for advisers and no weaker than the existing standard under the Advisers Act.”

But it was the two largest planning organizations that really touched me, by finally, and unconditionally, stating their complete support. “Requiring a fiduciary standard of broker-dealers doesn’t mean they need to stop earning commissions or providing services to middle-class clients. Rather, it means that they need to put their clients’ interests first by, among other things, fully disclosing and appropriately managing conflicts of interest. Financial planners, who have voluntarily embraced the fiduciary standard, have demonstrated that it can be applied successfully across business models for the benefit of both clients and advisors,” wrote Michael Branham, president of the FPA.

And even CEO Kevin Keller put the CFP Board’s position in no uncertain terms: “Fairness is at the heart of the debate surrounding the need for a fiduciary standard. Whether saving for retirement or their children’s college education, American investors should get advice that is best for them and not their financial adviser. We urge the SEC to…give American investors what they deserve – investment advice from an adviser who has a fiduciary duty to act in their best interests at all times.”

All of the groups who are involved with this letter are to be congratulated for reminding the SEC that its first obligation is to protect financial consumers, and that there is no protection stronger than having their interests put first. And from me, a special thanks to the three financial planning organizations—NAPFA, the FPA, and the CFP Board—for setting aside membership and financial considerations to remember that first and foremost, financial planning is about putting the clients’ interests first.